Lyle J. Fitterer grew up on a farm outside tiny Glen Ullin, N.D. Maybe that helped him learn how to separate wheat from chaff—a big virtue when it comes to evaluating municipal debt.

Undaunted by dire predictions of financial Armageddon for municipalities in recent years, the youthful-looking money manager has been racking up nice gains for the Wells Fargo Advantage Municipal Bond Fund by investing in some lower-quality munis. The fund (ticker: WMFAX), which has a juicy 3.9% yield, has outpaced 99% of 183 peers over the...